The Bank for International Settlements (BIS) published a BIS Papers study on how climate change affects central banking, focusing on macroeconomic transmission in African economies. It concludes that both physical risks from more frequent and severe weather events and transition risks from climate policy and market shifts can move inflation, output and financial conditions within policy-relevant horizons, with larger and more heterogeneous effects in economies with high exposure to agriculture and energy-intensive sectors. Model simulations using the BIS Multisector (BIS-MS) framework show that a temporary 25% rise in carbon-intensive energy prices and a temporary 25% negative productivity shock in agriculture both create inflationary pressures, output contractions and monetary policy tightening, with stronger and more dispersed responses across selected African countries than across the G7. An empirical exercise using global disaster damage data for 2000–24 similarly points to sizeable and uneven GDP losses from weather disasters across African sub-regions. The paper argues these results reinforce the need for stronger data and modelling to incorporate climate-related risks in monetary policy and financial stability analysis, and references BIS Innovation Hub work aimed at improving climate risk monitoring through tools such as digital twins, artificial intelligence-based data extraction and supply-chain emissions mapping.
Bank for International Settlements 2026-04-02
Bank for International Settlements research finds climate shocks can drive larger inflation and policy rate responses in African economies
The Bank for International Settlements published a study on how climate change affects central banking in African economies, finding that physical and transition risks materially influence inflation, output and financial conditions, with larger and more varied effects in agriculture- and energy‑intensive economies. Model simulations and empirical analysis show that shocks to carbon‑intensive energy prices, agricultural productivity and weather disasters generate inflationary pressures, output losses and uneven GDP impacts, underscoring the need for stronger data and modelling and highlighting BIS Innovation Hub work on climate risk monitoring tools.